By Andrew Bechel, Esq., LL.M
DISCLAIMER: Greenspoon Marder does not represent any party associated with the ongoing Broncos’ ownership controversy. We do not know what provisions are contained in the documents and this blog post uses publicly available information to illustrate how certain estate planning techniques could have helped prevent the current controversy.
Pat Bowlen was the longtime owner, President and CEO of the Denver Broncos. However, due to Alzheimers, he was forced to step down as the President and CEO of the Broncos and the team is currently controlled by the trustees of the Pat D. Bowlen Trust. Pat Bowlen has children from two marriages and there has been significant controversy over which of his children should take over control of the Broncos. Essentially, Pat’s daughter from his first marriage, Beth Bowlen-Wallace, wants to take over the team and is supported by Pat’s younger brother, Bill Bowlen. The trustees of the Pat D. Bowlen Trust, however, do not support Beth and feel that she is not capable or qualified to run the Broncos.
Rather, the trustees support Brittany Bowlen, Pat’s younger daughter from his second marriage. The trustees feel that she has the ambition to run the team, and they have been grooming her to take over the team. The trustees have laid out the criteria that any successor must meet before taking over control of the team, and, presumably, the trustees feel that Brittany meets or will meet such criteria.
While there are many points of contention among the family members concerning the trustees’ actions running the trust, whom should take over control of the Broncos, and even whether Pat had the capacity to sign the most recent amendment to his revocable trust, this is an illustration of an all too common occurrence faced by high-net worth families, particularly blended families: the family cannot agree on the disposition of assets or control of family businesses. It is important for the estate planner to consider these potential familial disagreements so that these issues can be addressed or prevented at the front-end, thereby preventing potential controversies that can cause irreparable harm to the family dynamic in the future. In this first installment looking at the Denver Broncos’ controversy, we will focus on the importance of including No-Contest clauses in estate planning documents to discourage intra-family litigation and to ensure that your client’s assets are managed in accordance with your client’s intentions.
No Contest, or “In Terrorem,” clauses can reduce, or even eliminate, controversies such as the one currently engulfing the Denver Broncos. A No Contest clause, essentially, provides that any person that challenges any aspect of a will or trust is automatically disinherited. Some trusts even contain clauses that provide that any beneficiary that challenges a trustee action is disinherited. It is important to note, however, that state law and public policy will dictate whether such clauses are permissible and how broad these clauses can be (for instance, a beneficiary likely will still be able to sue a trustee for breaching fiduciary duties), so you should confirm whether your state limits No Contest clauses in any way before including a clause in a client’s estate planning documents.
While No Contest clauses cannot prevent all litigation and controversies, the mere presence of a clause can have a chilling effect on any potential litigation. The risk to a beneficiary of losing their inheritance is simply too great unless it is clear that a valid claim exists, such as proof that a trustee has been using trust funds for the trustee’s personal benefit. As a result, most controversies will be prevented at the front-end, thus ensuring that the client’s intentions are followed even if the family does not agree with such intentions.
In the case of the Denver Broncos, a No Contest clause could have eliminated claims by Beth Bowlen-Wallace that she deserves to run the team over Brittany Bowlen, the trustees’ chosen successor. Assuming that the trust document provides the trustees with discretion concerning whom to turn control of the Denver Broncos over to and the trustees are not violating any fiduciary duties in choosing Brittany as a successor, any challenge by Beth Bowlen-Wallace to such trustee decision would cause Beth to lose her entire inheritance. If Bill Bowlen were also a beneficiary under the Pat D. Bowlen Trust, he would also potentially lose his entire inheritance as well as a result of his challenges to the actions of the trustees. To be clear, certain issues in controversy, such as whether Pat Bowlen had capacity to execute his documents, would not be prevented by the inclusion of a No Contest clause, but controversy specifically surrounding control of the Denver Broncos and the actions of the trustees could have been eliminated or, at a minimum, significantly curtailed.
A No Contest clause, while very beneficial, will not on its own eliminate these types of controversies. When there is a valuable family business, such as the Denver Broncos, it is important to have a clear plan for succession laid out during the older generations’ lifetime to ensure that the family business transitions smoothly to the younger generation. The next blog post will focus on the importance of business succession planning. However, especially when used in conjunction with a well thought out business succession plan, the inclusion of No Contest clauses can prevent the types of family controversies such as the one currently playing out with regard to the Denver Broncos.